Second Mortgage Loans vs. HELOC
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If you suddenly find yourself in need of a sum of money and you own (or are in the process of owning) your home, then you have several options available to you. You could take out a second mortgage in Hamilton to help you cover these costs, or you could draw on a HELOC, or home equity line of credit.
What Is a Second Mortgage?
Second mortgages in Hamilton are, for all intents and purposes, the same as your first mortgage. You borrow a lump sum of money from a bank using your property as collateral, and you make the same monthly payment on that amount until you pay it off completely. Second mortgages usually have fixed interest rates, and like your first mortgage, you can set it up over a 15-year or 30-year repayment term. The primary risk associated with a bad credit mortgage in Hamilton is that you can lose your home if you get too far behind on your payments. What′s more, a second mortgage can be quite difficult to find since your home is already collateral for the original mortgage.
What Is a HELOC?
A home equity line of credit is much different from bad credit mortgages in Hamilton. This type of loan allows you to use the equity in your home as a revolving line of credit. To understand how this works, the equity in your home is the difference between the amount you owe on your mortgage and the value of your home. For example, if you owe $75,000 on your mortgage but your home is worth $125,000, then you have $50,000 worth of equity that you can draw on as credit. A HELOC is often better than a second bad credit mortgage in Hamilton because it comes with less risk. You can flex your payments to fit your budget as long as you are making the agreed-upon minimum monthly payment.
When a Second Mortgage is a Good Idea
Although a HELOC certainly sounds like the better option since you can decide how much to pay each month, there are some cases in which a second bad credit mortgage in Hamilton is ideal. For instance, if you want to remodel your basement and you know it will cost $20,000, then a second mortgage for that amount gives you consistency and a set plan. On the other hand, if you want to remodel a nursery, fix the garage, and repave your driveway but you have no idea how much the total cost will be, a HELOC gives you the flexibility you need to make sure everything is covered. You will not run out of money (if you plan wisely) and you do not have to borrow more than you need.
Second mortgages in Hamilton can help you pay off an automobile, cover the cost of college, pay for renovations, or even help you consolidate your bills. Deciding between a second mortgage in Hamilton and a home equity line of credit may seem daunting at first, but once you understand the differences, it becomes clearer.